INDEX [www.bombaychamber.com]

1 Amendments to the Bombay Stamp Act, 1958 Recommendations of Bombay Chamber of Commerce and Industry Bombay Chamber of Commerce and Industry Page i INDEX Sl. No. Title Page No. General Observations 1 A. Agreements with Monetary Value 2 1. Article 5(h-A)(iv) - Stamp duty on an agreement creating an obligation, right or interest and having monetary value but not covered under any other article 2 B. Corporate Actions 3 2. Article 5(c)(ii) - Stamp duty payable on an agreement relating to the purchase or sale of shares, bonds, debentures, debenture stock or any other marketable security of a like nature 3 3. Article 10 - Articles of Association of a Company 3 4. Article 17 Stamp duty on value of shares 4 5. Article 25(da) - conveyance relating to an order of the High Court in respect of an amalgamation or reconstruction under S.

2 394 of the Companies Act, 1956 4 6. Article 39 Memorandum of Association 5 7. Article 43(f) - Stamp duty on a Note or Memorandum & Article 51A - Record of Transaction 6 C. Conveyance 7 8. Article 5(g-a) - Stamp duty on agreement relating to giving authority or power to a promoter or a developer for construction, development of or sale or transfer of any immoveable property 7 BOMBAY CHAMBER S RESPONSE ON DRAFT COMPETITION COMMISSION (COMBINATION) REGULATIONS 200_ Bombay Chamber of Commerce and Industry Page ii Sl. No. Title Page No. 9. Article 25 Conveyance 9 10. Article 36 Lease 11 11. Article 40 Mortgage Deed 13 12. Article 60 Transfer of Lease by way of an assignment 15 D. Miscellaneous 17 13. Article 5(h-A)(iii) - Stamp duty on an agreement relating to specific performance by any person or group of persons, where the value of the contract exceeds Rs.

3 1 lac 17 14. Article 47 Partnership 17 Bombay Chamber of Commerce and Industry Page 1 AMENDMENTS TO THE BOMBAY STAMP ACT, 1958 RECOMMENDATIONS OF BOMBAY CHAMBER OF COMMERCE AND INDUSTRY Set out below are some suggestions that may be considered by the Government for revising stamp duty rates set out in Schedule 1 of the Bombay Stamp Act, 1958 ( Bombay Stamp Act ). Our recommendations are based on an analysis of the impact of the stamp duty rates on commerce in the State of Maharashtra and a comparison of the rates prevailing in the National Capital Territory of Delhi. General Observations 1. Based on the Hobbesian philosophy that every citizen of a state will be required to contribute to the state exchequer in return for protection from the state, various countries across the world introduced duties on instruments and transactions.

4 Stamp duties were initially introduced as and continue to be a main source of revenue for states in India. 2. However, over a period of time, though there has been an increase in the stamp duty rates applicable in various states, the absolute returns to the state have diminished on account of the fact that factors such as inefficiency in tax administration have not been rectified and the high rates have contributed to increased evasion. For example, in the year 2000-2001, given that the stamp duty payable on a mortgage was much higher in the state of Maharashtra as compared to the state of Gujarat, a number of transactions involving the issuance of debentures (on which stamp duty as payable on a mortgage of immoveable property was required to be paid) were structured in Gujarat to reduce the amount of stamp duty payable. Press reports however suggest that with the introduction of a cap on the stamp duty payable on the same under the Bombay Stamp Act, companies issuing debentures preferred to issue the debentures in the state of Maharashtra.

5 Studies further show that with respect to real estate transactions, lowering the stamp duty payable on such transactions by some states in India has resulted in an increase in revenue for such states. For example, when the State of Rajasthan reduced the stamp duty rates from 12% to 7% in 1996-1997, studies conducted by the World Bank show that the revenues increased by 36 percent between 1996-1997 and 1998-1999. 3. The Mumbai High Court is considered to be the most appropriate jurisdiction for any litigation relating to commercial matters. In light of the competency of the Mumbai High Court and other factors (such as resource availability etc.), companies / parties would in the ordinary course prefer to establish their registered offices in the state of Maharashtra or execute transactions in the state of Maharashtra. Thus, if the state were to consider including reasonable stamp duty rates (and caps) in the Bombay Stamp Act, there will be a positive impact on the commerce in the state.

6 An increase in commercial activities in the state would also have other ancillary benefits, such as an increase in employment opportunities, increased local tax collections, etc. 4. Rationalization of the stamp duty rates will incentivize parties to regularize their transactions and would result in increased collection of taxes both at the central and state government levels. Any initial loss in revenue as a result of lower stamp duty rates can be offset by appropriately designed intergovernmental transfers. Additionally, instead of imposing very high stamp duty rates, the Government should consider (a) including a gradation system with respect to the imposition of stamp duty, based on the volume of the transaction etc., and (b) reforming the tax administration system in the state (including evolving specific guidance values for real estate properties). Amendments to the Bombay Stamp Act, 1958 Recommendations of Bombay Chamber of Commerce and Industry Bombay Chamber of Commerce and Industry Page 2 Specific Recommendations SL.

7 NO. PROVISIONS IN THE BOMBAY STAMP ACT, 1958 SUGGESTED AMENDMENTS PROVISIONS IN THE INDIAN STAMP (DELHI AMENDMENT ACT), 2007 RATIONALE FOR THE SUGGESTED AMENDMENTS A. AGREEMENTS WITH MONETARY VALUE 1. Article 5 (h-A) (iv) Stamp duty on an agreement creating an obligation, right or interest and having monetary value but not covered under any other article Stamp duty payable if the amount agreed does not exceed Rs. 10 lakhs of the total value of the contract In any other case of the total value of the contract We would request that the Government clarify the agreements that are sought to be covered under this Article. In its current form it includes all service contracts, loan agreements, security agreements, investment agreements, etc. Previously, there was a cap of Rs. 10 lakhs. Please consider introducing a cap on the total amount of stamp duty payable under this provision.

8 If 10 lakhs is deemed to be too low, a graded cap can be introduced, depending on the nature and value of the agreement. There is no corresponding provision under the Delhi Stamp Act and for agreements that are not specifically mentioned in Article 5 therein, the stamp duty payable is Rs. 50. In light of the high stamp duty rates in the State of Maharashtra, parties normally execute documents outside the State of Maharashtra, where the stamp duty rates are lesser. Consequently, the state loses revenue. Previously, inspite of the high stamp duty rates, parties still considered execution of such agreements in the Maharashtra on account of the cap on the stamp duty payable under this provision (Rs. 10 lakhs being the maximum stamp duty payable). This was mostly because of the competency of courts in Mumbai in commercial matters.

9 However, with the deletion of the cap in the recent amendments to the Bombay Stamp Act, execution of such agreements in Maharashtra could become commercially unviable. Amendments to the Bombay Stamp Act, 1958 Recommendations of Bombay Chamber of Commerce and Industry Bombay Chamber of Commerce and Industry Page 3 SL. NO. PROVISIONS IN THE BOMBAY STAMP ACT, 1958 SUGGESTED AMENDMENTS PROVISIONS IN THE INDIAN STAMP (DELHI AMENDMENT ACT), 2007 RATIONALE FOR THE SUGGESTED AMENDMENTS B. CORPORATE ACTIONS 2. Article 5 (c)(ii) - Stamp duty payable on an agreement relating to the purchase or sale of shares, bonds, debentures, debenture stock or any other marketable security of a like nature Stamp duty payable - .01% of the total value of the agreement Please consider introducing a cap on the stamp duty payable on an agreement relating to sale of shares.

10 Per the provisions of the Indian Stamp (Delhi Amendment) Act, 2007 ( Delhi Stamp Act ), stamp duty on an agreement relating to the sale or purchase of shares is capped at Rs. 1000. Items set out in sl. Nos. 2 to 7 of this Memorandum, deal with corporate actions taken by the Company which are often linked to the place of the registered office of the company. The high stamp duty rates in Maharashtra are causing companies to establish their registered offices in other states. Such a practice results in a loss of revenue for the state exchequer both as a result of non receipt of stamp duty and other taxes (such as VAT) or other fees (such as fees payable under the Shops & Establishments Act) not being received by the state. Further, establishment of registered offices within the state also has other ancillary benefits as the company would be carrying on its operations within the state.